Hormuz Closure Sparks Fears of Oil Supply Crunch

The oil market is on the brink of a supply crunch as the Strait of Hormuz remains closed, threatening to disrupt global energy supplies.

The industry has shown remarkable resilience in the face of the Iran war, but with peace efforts faltering, the risk of renewed military escalation remains high. The clock is ticking, and the oil market likely has about three months before tightening supplies begin to bite, pushing inventories to critical lows and triggering sharper price gains.

Despite the industry's response to the crisis, including a record 400 million-barrel release from member states' strategic reserves, global oil demand is already contracting. The International Energy Agency estimates that demand will fall by 2.4 million barrels per day in the second quarter from a year earlier, representing about 2.3% of pre-war consumption.

Veteran independent analyst Paul Horsnell estimates that stock draws may prove both deeper and longer-lasting than official forecasts imply, with a cumulative loss of around 1.2 billion barrels of global inventories at a rate of 7.4 million bpd in March, 10.8 million bpd in April, 10.2 million bpd in May, and 11.2 million bpd in June.